What is the difference between a custodian and a fund administrator?

GPs often confuse custodians and fund administrators, yet these two service providers play fundamentally different roles in fund infrastructure. While both are essential to fund operations, they serve distinct regulatory and operational functions that complement each other in the fund management ecosystem.

Custodians Responsibilities

In private markets, custodians play a narrower but vital role focused on asset safekeeping and legal ownership. Their primary responsibility is to hold fund assets, typically bank accounts, partnership interests, or physical assets in segregated accounts, ensuring they are protected and clearly attributed to the fund or its investors. Custodians may also handle cash management and documentation for capital activity. While not always mandated for private funds, institutional investors or jurisdictions may require a qualified custodian to meet regulatory standards and provide an added layer of security and oversight.

Fund Administrators Responsibilities

Fund administrators manage the day-to-day operational and reporting infrastructure behind private market funds. Their responsibilities span fund accounting, investor servicing, unit registry, compliance support, and preparation of financial statements and investor communications. Unlike custodians, administrators don’t hold assets, they maintain the books and records, calculate NAVs, manage capital activity, and ensure reporting is accurate and audit-ready.

Leading providers like Caruso integrate fund admin software and services to automate these workflows, reducing risk, improving margins, and delivering a better experience for both managers and investors.

How They Work Together

In private market funds, custodians and fund administrators perform distinct but highly complementary roles. Custodians safeguard the fund’s assets, while administrators maintain the fund’s books and records, process capital activity, and manage investor reporting. Daily or weekly collaboration is common: custodians confirm cash movements and asset transfers, which administrators then reconcile against investor and fund-level records. This separation of asset custody from record-keeping helps establish operational integrity, reduces the risk of error or fraud, and ensures transparency for auditors and investors.

Caruso’s Fund Admin Services

Caruso delivers modern fund administration purpose-built for private markets, combining expert services with integrated software to streamline every stage of fund operations. From investor onboarding and unit registry to fund accounting, capital calls, distributions, and reporting, Caruso acts as the operational backbone for GPs, seamlessly integrating with custodians and other service providers.

Our AI-powered fund admin tools help automate tedious administrative tasks, improve accuracy, and free up teams to focus on higher-value activities. Whether you’re launching a new fund or scaling a complex strategy, Caruso provides the infrastructure and insight to reduce costs, operate more efficiently, and deliver a superior investor experience.